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Datatec to Sell Major Stake in Westcon-Comstor

Financial Information*
  • Enterprise Value: $800 million*
Transaction Facts
  • In a note to its shareholders today, Datatec Ltd. (JSE: DTC), an international ICT solutions and services group operating in more than 60 countries, announced it is in negotiations to sell a major stake in its value-added distributor, Westcon-Comstor, for more than $800 million.
  • While maintaining that a transaction bears no certainty, Datatec first informed shareholders of its potential plans in January and updated the cautionary announcement in early March.
  • Datatec’s drop in earnings per share, which are expected to be more than 50 percent lower year-over-year, linked solely with Westcon-Comstor’s worse-than-expected performance. The distributor faced a decline in fourth quarter financial performance in all geographies except Asia-Pacific.
  • Shares rose 13.8 percent after circulation of the news.
  • Datatec’s revenue is $6.4 billion.
A Changing Distributor Landscape
  • Recovering Lost Ground: Founded in 1985 and generating $5 billion in revenue, Westcon-Comstor is Datatec’s largest subsidiary. But the distributor has experienced difficulties in the final stages of its SAP implementation in the Europe Middle East and Africa (EMEA) region. Though Datatec has made adjustments to its operating model and expects a fast recovery, the company is still recovering lost ground.         
  • Optimism in Solutions: By contrast, Datatec’s solution provider Logicalis, which has an annual revenue of over $1.5 billion, has been performing up to expectations. In early March, Logicalis started new operations in South Africa.
  • Consolidation Continues: This potential transaction would further the rapid changes underway in the channel. With Tech Data’s $2.6 billion acquisition of Avnet Technology Solutions, HNA Group’s $6 billion acquisition of Ingram Micro, and Arrow Electronics’ acquisition of Distribution Channel just last year, the distributor space is transforming through major M&A.
For more information about this announcement, click here to read the announcement.
*Enterprise value derived from the announcement.
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